Red Lodge Clearinghouse

A federal appeals court today rejected the Bush administration's strategy for regulating mercury emissions from coal-fired power plants, effectively invalidating a cap-and-trade program that would have given utilities maximum flexibility to reduce the toxic metal.

The U.S. Circuit Court of Appeals for the District of Columbia decision is a major blow to the electric power sector, which has spent four years preparing to implement the new program, codified under the Clean Air Mercury Rule (CAMR).

Environmentalists and other opponents of CAMR, including 14 state attorneys general, hailed the decision as a major victory that will force EPA to hold electric utilities to the tightest possible emissions standards allowed under the Clean Air Act.

"Today's decision ... requires EPA to get back to the business of protecting people's health rather than higher profits for electric utilities," John Suttles, an attorney with the Southern Environmental Law Center, said in a statement.

The center represented four public health advocacy groups who intervened in the initial challenge to the rule brought by the state of New Jersey.

EPA had itself placed emissions from coal-fired power plants under the most restrictive Clean Air Act category in 2000 but reversed itself in 2005 when developing a new, more flexible approach for addressing mercury emissions from such plants.

The court found that EPA erred in adopting two new rules regarding hazardous air pollutants from new and existing power plants.

The first rule removed coal- and oil-fired power plants from those sources regulated under Section 112 of the Clean Air Act, which places tight controls on hazardous chemicals and other toxic substances emitted from industrial sources.

The second rule set new performance-based standards for coal-fired power plants that emit mercury, essentially laying the groundwork for the highly controversial CAMR program, including the cap-and-trade provisions for new and existing coal-fired units.

Because coal-fired plants are listed sources under Clean Air Act Section 112, regulation of existing coal-fired mercury emissions under Section 111 is prohibited, "effectively invalidating CAMR's regulatory approach," a three-judge panel of the court ruled.

'Major setback' for utilities

Dan Riedinger, a spokesman for the Edison Electric Institute, which represents investor-owned electric utilities, said today's decision "represents an major set-back for federal efforts to establish clear mercury regulations for coal-fired power plants," adding that, "Now EPA has to go back to the drawing board, pushing mercury regulations far off into the future."

EPA had estimated that CAMR would reduce electric power sector mercury emissions by up to 70 percent over the next decade, from 48 tons of annual emissions to 15 tons.

The measure drew fierce criticism from environmental groups, state regulatory agencies and some members of Congress who argued the plan required too little of power plant owners.

In the wake of CAMR's 2005 implementation, numerous states passed their own mercury rules that were tougher than EPA's standards, often requiring greater than 90 percent reduction of mercury emissions within a decade or less.

EEI's Riedinger said today's ruling will not affect utilities' ongoing efforts to improve mercury controls on new and existing plants, whether to meet other federal or state-based requirements. "So, air quality will continue to improve," he said. "But we won't know for a number of years what level of mercury reduction the federal government ultimately will require."

One of the chief architects of CAMR described the court's decision as "technical" and insisted it doesn't invalidate cap-and-trade as a method for controlling the toxic pollutant. "What it really means is EPA has to go back to the drawing board," said Jeff Holmstead, former EPA air chief during the Bush administration.

Holmstead, now an industry lobbyist in the Washington lawfirm of Bracewell & Giuliani, said the court failed to address some of the broader policy implications of CAMR, including mercury's global distribution and the primary route of human exposure to the metal, which comes from eating certain seafood species that accumulate mercury in their tissues.

"I think what EPA did was clearly the right thing from a policy perspective," he said. "Nothing that the court says undermines that. We made a couple key findings that the court never addresses."

EPA is unlikely to complete its work until after Bush's second term ends, Holmstead said.

Unlikely case for Supreme Court?

In the meantime, Holmstead said he would urge EPA to appeal the decision to the entire D.C. Circuit, but he was less certain the case deserved the Supreme Court's attention. "It does seem like it's a narrow enough decision that the Supreme Court is unlikely to take it," he said.

The three-judge panel that issued today's ruling was the same one that in 2006 rejected the Bush administration's controversial changes to the Clean Air Act's New Source Review program, which regulates upgrades and modifications to existing coal-fired plants. The panel then referred to EPA's interpretation of the Clean Air Act as reflecting a "Humpty Dumpty world."

Judges David Tatel and Judith Rogers are appointees of former President Clinton. Judge Janice Rogers Brown joined the court in 2005 after a testy nomination fight in the Senate.

Click here to review the D.C. appeals court decision.